It depends on what ones definition of inflation is. I was referring to price action
Good. But "inflation" is not used for the price increase of bubble gum. Or even oil. You say oil prices have "increased". When you talk about "inflation", you are talking about the economy in general.
we can easily see price going one way for producers and another way for consumers.
Yes, but, as I said in the previous post, it does NOT mean the economy is undergoing inflation and deflation at the same time.
It just means producer prices increased while consumer prices decreased that month. That is all.
So you tell me. what is inflation?
Very simply, inflation is a broad price increase. Prices of some items might be decreasing, but we still talk of inflation because there is a broad price increase. The criterion for this "broad price level" is CPI or PPI. When you see these increasing over time, there is inflation.
That is why you see Fed talking about "price stability" when the subject is inflation. That is also why, when someone says "inflation was 3% last year", he is referring to price increases (CPI/PPI) and not to an increase in money supply, credit, etc.
Money supply, credit, etc can all CAUSE inflation. But they are not inflation.
This is a subject matter for Econ 101, and frankly, I cannot see why so many well-informed & smart people on SI are spending time redefining the concept. Reading about Austrian School and then deciding to define inflation differently is all well and good but doesn't help when you are communicating with other people... |
